AS the recent bloody disturbances in Venezuela illustrate, Latin America's prolonged economic crisis is likely to produce political crises in the next few years. As moderate, democratically elected leaders fail to reverse economic deterioration, alternatives are growing: elected but radical populist leaders; renewed military rule; violent disturbances; or, in some cases, even revolution. All of these unpleasant scenarios are real possibilities in Peru. Its fragile democracy is threatened by economic collapse and social disintegration. Unless this decline can be halted, Peru is likely to be the first nation to reverse the democratic tide that has swept Latin America in the 1980s.
Peru's economic plunge is deep. The economy shrank more than 10 percent in 1988, while the minimum wage sank to 50 cents a day. Inflation reached almost 2,000 percent in 1988. The country's lower and middle classes are desperate.
The most immediate reason for Peru's economic collapse is mismanagement. When President Alan Garc'ia P'erez unilaterally reduced Peru's debt service in 1985, the resulting savings were squandered amid incoherent policies. Peru's commodity-based economy has been losing ground for 30 years, but the decline has accelerated in the past five years. In 1960, Peru was in the mid-range of South America's economies; now only Bolivia is poorer.
Peru's economic deterioration has fueled the growth of a grisly insurgency, the Shining Path (Sendero Luminoso). The Shining Path is increasingly bold. More deaths were attributed to the rebels in November 1988, than in any previous month. The movement now controls much of the Central Andean highlands, including the region east of Lima - as well as the coca-growing area in the Huallaga Valley, where it may net as much as $30 million a year from its activities.
Many residents of the coastal capital fear encirclement by the Shining Path; in a recent poll, 15 percent said they believed the Shining Path will eventually take over Peru, up from 4 percent a year ago. Right-wing death squads emerged for the first time in 1988.